May 2018

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Experts from Development Research Center of the State Council suggest that the state should restore export tax rebate rate of textiles and garment to 17 percent and at the same time abolish floating-duty on cotton imports.

Experts analyze that overall international cotton prices have been higher than domestic prices since 2008 due to which imported cotton price is about 970 Yuan per ton higher then domestic cotton price after payment of floating-tax duty.

So, when an enterprise imports cotton, the cotton consumption cost of that company is 19-20 percent higher than surrounding countries, which affects international competitiveness of Chinese cotton spinning enterprises.

After abolishing the floating-duty, the state council could consider providing direct subsidies to cotton farmers, if at all international cotton prices dip below levels prevailing in the domestic cotton markets.

The sales tax recovered from the textile industry is 17 percent, but the state deducts only 13 percent tax for purchases like cotton, unclean wool, raw silk and hemp made by general enterprises, which is a disadvantage of 4 percent to textile enterprises.

Experts recommend the state should adopt the same policy of VAT tax deduction between textile enterprises and general corporate units and the deduction of input tax rate on the above-mentioned raw materials should be increased from 13 percent to 17 percent.

Experts also suggest some other measures for relaxing restrictions, such as loan guarantees, letters of credit, extension, and abolition of floating lending rate for textile enterprises, cancellation of increased fees and other discriminatory policies.